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Non-basmati rice exporters to suffer, while basmati rice exporters could flourish due to export ban

04 August 2023

The recent government notification to ban the export of non-basmati white rice is expected to result in better operating performance and aid the credit profile of India’s top basmati rice exporters, says India Ratings and Research (Ind-Ra).

On July 20, with a view to control the soaring prices of this staple food grain in the domestic market, India imposed a ban on export of non-basmati white rice. Industry observers say late monsoon arrival and deficient rains until mid-June have raised serious concerns about paddy output in the country.

India is the world's largest rice exporter, accounting for around 40% of the global share. It is followed by Thailand (13% share) and Vietnam (9% share), among others.

In financial year 2023, India exported 14.24 million tonnes of non-basmati rice.

The ban on exports made headlines in several developed nations, causing panic buying in various countries, including the US, Canada and Australia.

Countries importing basmati rice are also now concerned about a potential ban on the category and are, therefore, requesting early shipments, which could lead to higher prices in the short and medium term, says Ind-Ra. It further notes that many farmers have switched to producing basmati rice to take advantage of the significant price difference in export markets.

The top four basmati rice exporters have experienced a surge in demand and profits since FY21. The ban on non-basmati rice may lead importing countries to shift to the basmati category, albeit on a small scale, due to the significant price difference and lower production and supply. This could result in higher inflation in those importing countries.

Ind-Ra’s latest report points out that major Indian rice exporters primarily deal with basmati rice, and the increasing demand and realisation in this category have positively influenced their operating performance during FY23.

“Revenues for the four major basmati exporting companies have grown at a median rate of 28% year-on-year. The export ban on non-basmati rice may further benefit these companies by improving liquidity due to early shipments requested by importing countries, fearing a ban on basmati rice. Additionally, the elevated price of basmati in export markets and the shift in demand from non-basmati to basmati rice could lead to increased volumes, revenues and profitability in the medium term for basmati ri ..

Non-basmati rice accounts for 80% of India's rice exports and the export ban is expected to have significant implications on the consumption choices in rice-importing nations. The prices of both basmati and non-basmati rice have been on the rise since FY22 because major global suppliers such as Thailand and China reduced their exports after the pandemic to ensure domestic food security. “The realisation of basmati rice price jumped to 84 a kg in FY23 from 64 a kg in FY21 and reached 91 a kg duri ..India's rice production has shown a compound annual growth rate (CAGR) of 2.6% in the past decade, while consumption has grown at 1.3%. The decision to ban non-basmati rice exports is likely driven by the impact of adverse climatic changes on food grain production over the years and the recent price rise in the domestic market.

Source: The Economic Times